13. Executive Or Loan Committee

Many institutions have assumed that a large board of directors, whose names are well known, is the best advertisement a bank or trust company can have. Such a list of names is a good advertisement and draws deposits, but it does not guarantee the loans and investments into which the deposits are converted. It is customary when the board is large to appoint a sub-committee of five or more directors, called an executive, loan or discount committee. This committee holds frequent meetings, usually weekly, but often daily, and authorizes or refuses loans or discounts offered. The minutes of this committee are read to and frequently approved by the full board, which usually meets monthly. In very many companies this committee does all the work and their acts are approved by the board to make their actions legal. For a commercial bank a small active board gives better results than an inactive large one.

14. Conduct Of Meetings

A quorum usually consists of a majority of the whole board. When the majority is referred to in the laws, the majority of the full board is meant and not a majority of those who have qualified, or of the quorum or more present at the meeting.

A very simple device for conduct of meetings is to have a number of sheets mimeographed or printed, showing the names of the directors and the routine business that must be transacted. This should be placed in front of the president, who should check off the names of those present and make memoranda in regard to regular motions. The meetings will then be conducted in regular order and nothing omitted that should be approved.

The board of directors must act as a body. No director has authority to bind the bank unless he has special authority to act as its agent.

15. Loans To Directors And Officers

Loans to directors, officers or employes should be presented specially to the board, and should be approved by a majority of them before the loan is made. A record of such approval should appear on the minute book. Some institutions absolutely prohibit any such loans. In large cities this is possible, and makes one of the best advertising sentences that can be used. In small cities, it is impossible and inadvisable to make such a rule, because the best men for directors are the business men of the town, and if they are prohibited from borrowing because directors, they will refuse to become directors. Their loans are usually the best in the portfolio.

16. General Form Of By-Laws

Under the National Bank Act, the power to adopt by-laws is conferred upon the board of directors. Every by-law and every alteration thereof must be consistent with the National Bank Act and with the articles of association. In general, the by-laws should provide for the election of directors; they should state what officers there shall be and define their duties. An impression of the seal of the bank should be made on the form sent to the Comptroller, and a statement made that it is the official seal. The by-laws should provide for the manner of making conveyances of real estate and for increase of capital stock. They should regulate, in a general way, the business of the bank, the date of meetings of board of directors, subcommittees, etc., and should regulate transfers of stock, signing of contracts and amendments, and determine how many members of the board shall constitute a quorum. A very complete sample copy of by-laws for national banks will be found in "Pratt's Digest." 1 The interested reader is referred thereto for more complete information. The form of by-laws varies somewhat in different states and institutions, but the general form is as indicated above.